What Is a Builder in Good Faith Under Philippine Property Law?

Introduction

A person who constructs a building on land that belongs to another may acquire important rights if the construction was made in the honest belief that the land was owned, or lawfully possessed, by the builder. Philippine property law calls this person a builder in good faith.

The classification matters because it may determine whether the builder can demand reimbursement for useful and necessary expenses, retain possession of the property until payment, or be required to remove the structure at personal expense. The result depends on the builder’s state of mind, the nature of the builder’s title or claim, the landowner’s conduct, and any contractual relationship between the parties.

What Is a Builder in Good Faith?

Under Article 448 of the Civil Code, a builder in good faith is generally a person who constructs a building on another person’s land while believing that he or she owns the land, or at least has a valid claim of title to it, and is unaware of any defect in that title or mode of acquisition.

The Supreme Court explained that good faith requires more than a mere belief that construction is permitted. The builder must ordinarily possess the land in the concept of an owner or assert a claim of title over it. A person who knows that he or she is merely a tenant, caretaker, agent, usufructuary, or tolerated occupant generally cannot invoke the rights of a builder in good faith.

In [Agapito v. Agapito (2022)](#J1.6), the Court stated that builders are in good faith when they believe themselves to be owners, or at least have a claim of title, and are unaware of a defect in their title or mode of acquisition. The Court also recognized that Article 448 may apply in certain situations where the landowner is likewise in bad faith.

Legal Basis Under the Civil Code

Article 448 of the Civil Code provides the principal rule on accession involving a building, planting, or sowing made in good faith on another person’s land. The landowner generally has the right either to appropriate the improvement after paying the proper indemnity or to require the builder to purchase the land, subject to the limitations stated in the law.

The landowner’s choices are not unlimited. If the value of the land is considerably greater than the value of the building, the builder cannot be compelled to buy the land. In that situation, the builder may instead be required to pay reasonable rent if the landowner does not elect to appropriate the improvement after proper reimbursement.

Articles 546 and 548 of the Civil Code govern reimbursement for useful and necessary expenses. A builder in good faith may generally demand reimbursement for useful improvements and necessary expenses, subject to the applicable valuation rules.

Article 453 provides that when both the landowner and the builder are in bad faith, their rights are treated as though both had acted in good faith. The landowner is considered in bad faith when the construction was done with the landowner’s knowledge and without opposition.

Article 454 further provides that when the landowner is in bad faith but the builder is in good faith, the provisions of Article 447 apply. These provisions generally give the landowner the right to require the builder to remove the improvement or allow the builder to obtain reimbursement under the circumstances specified by law.

Elements of Good Faith

The usual indicators of a builder’s good faith include the following:

• Belief in ownership or a claim of title. The builder must ordinarily believe that the land is owned by the builder or that the builder has a legal title or interest authorizing construction.
• Absence of knowledge of a title defect. The builder must be unaware of a flaw in the title or mode of acquisition.
• Possession in the concept of an owner. Mere physical occupation is insufficient if the builder recognizes another person as the owner.
• Reasonable diligence. The builder should have taken reasonable steps to verify ownership, especially when the property is registered or when conflicting claims exist.
• Good faith at the time of construction. The builder’s state of mind when the improvement was introduced is ordinarily decisive.

Good faith is generally presumed under Article 527 of the Civil Code. However, the party claiming good faith must still establish the factual basis for the claim when the evidence shows that the builder knew, or should have known, that another person owned the land.

When Is a Builder Considered in Bad Faith?

A builder is generally in bad faith when the builder knows that the land belongs to another, knows that the builder’s title is defective, or builds despite an express objection from the landowner.

In [Padilla, Jr., et al. v. Malicsi, et al. (2016)](#J2.0), the Supreme Court held that a person who fails to exercise the necessary diligence to verify ownership cannot automatically claim good faith. This is particularly important where the land is registered and the person relied only on the representation of someone who was not the registered owner.

Similarly, in [Philippine National Bank v. De Jesus (2003)](#J6.0), the Court held that a person who builds with knowledge that the land is not owned by the builder, or with awareness of a defect in the builder’s title, is not a builder in good faith. The true owner may, in appropriate circumstances, demand removal of the improvement at the builder’s expense.

Knowledge of an adverse claim, a prior demand to vacate, an existing dispute over ownership, or the absence of any colorable title may be evidence of bad faith. Construction made after the builder has been informed of the landowner’s objection is especially difficult to defend as an act of good faith.

Rights of a Builder in Good Faith

1. The landowner’s option under Article 448

The landowner generally has the option to:

• appropriate the building as the landowner’s own after reimbursing the builder for the proper expenses; or
• require the builder to purchase the land, subject to the statutory limitation when the land’s value is considerably greater than the value of the improvement.

The landowner’s option is the controlling choice under Article 448. The builder cannot ordinarily compel the landowner to sell the land or to appropriate the building in a particular manner.

2. Reimbursement

A builder in good faith may be entitled to reimbursement for useful and necessary expenses. The amount is not automatically equal to the builder’s claimed construction cost. Courts may consider the improvement’s value, the benefit received by the landowner, depreciation, and the evidence supporting the expenses.

The builder should preserve receipts, construction contracts, permits, photographs, plans, proof of payment, and competent valuation evidence. Unsupported estimates or self-serving testimony may be insufficient to establish the amount recoverable.

3. Right of retention

Where the law grants reimbursement for useful and necessary expenses, the builder may have the right to retain possession of the premises until proper reimbursement is made. In [Agapito v. Agapito (2022)](#J1.10), the Supreme Court recognized the builder’s right of retention in relation to the reimbursement rights under Articles 448, 546, and 548.

The right of retention is not the same as ownership. It permits continued possession under the conditions recognized by law, but it does not transfer title to the land or permanently prevent the landowner from exercising the Article 448 option.

When Article 448 Does Not Apply

Article 448 does not automatically govern every dispute involving improvements on another person’s land. The following circumstances may prevent its application:

Contractual arrangements

When the parties have a lease or another contract that expressly governs improvements, the contract may control. In [Dakak Beach Resort Corporation, et al. v. Mendezona, et al. (2024)](#J4.12), the Court held that a lease provision transferring permanent improvements to the lessor upon termination prevented the lessee from claiming reimbursement under Article 1678 or invoking the rights of a builder in good faith under Articles 448 and 546.

Parties should therefore examine the lease, construction agreement, authority to occupy, and any provision concerning ownership of improvements upon expiration or termination.

Mere tolerance or permission to occupy

A person who occupies land merely by tolerance generally does not possess it in good faith as an owner. Permission to stay does not necessarily amount to consent to claim ownership or to construct improvements at the landowner’s expense.

Consent may nevertheless affect the analysis when the builder reasonably believed that the person giving consent was the owner or had authority to permit the construction. The facts must show whether the consent created a reasonable basis for the builder’s belief in the right to build.

Construction by a tenant or other holder

Article 448 ordinarily does not apply when the builder’s interest is merely that of a tenant, agent, or usufructuary. The parties’ relationship may instead be governed by the Civil Code provisions on leases, the contract itself, or another applicable law.

Consent of the Owner and Exceptional Applications

Although the ordinary definition of a builder in good faith focuses on a claim of title, the Supreme Court has recognized exceptional situations in which Article 448 may apply despite the absence of strict ownership-based possession.

In [Cecilia, et al. v. Dela Cruz, et al. (2014)](#J3.17), the Court noted that Article 448 has been applied in certain cases where the builder constructed improvements with the owner’s consent. The Court also referred to cases involving a co-owner whose building overlapped another person’s land and a builder who relied on the consent of someone mistakenly believed to be the owner.

These exceptions do not mean that every person who receives permission to build is automatically a builder in good faith. The court must examine the source of the permission, the builder’s belief, the parties’ relationship, and the circumstances surrounding the construction.

Both Parties Acting in Bad Faith

Article 453 applies when both the builder and the landowner acted in bad faith. The builder may be in bad faith because the builder knew that the land belonged to another. The landowner may also be in bad faith when the landowner knew of the construction and failed to object.

When both parties are in bad faith, their rights are treated as though both acted in good faith. Thus, the landowner may still be required to choose between appropriating the improvement after reimbursement or requiring the builder to purchase the land, subject to Article 448.

The landowner’s silence is not automatically bad faith in every case. The evidence must show knowledge of the construction and an absence of timely opposition. Written objections, demands to stop construction, and notices to vacate may help establish that the landowner did not acquiesce.

Typical Examples

Example one: Mistaken reliance on a defective title

A buyer purchases land under a deed that appears valid and constructs a house before discovering that the seller had no authority to convey the property. If the buyer had no knowledge of the defect and reasonably believed in the validity of the acquisition, the buyer may be treated as a builder in good faith.

Example two: Construction by a tolerated occupant

A relative is allowed to stay on a parcel of land without rent and constructs a house while acknowledging that the land belongs to another relative. The occupant will generally have difficulty claiming builder-in-good-faith rights because the possession is based on tolerance rather than a claim of ownership.

Example three: Failure to check registered ownership

A person purchases a lot from someone who is not the registered owner and builds without checking the title or confirming the seller’s authority. If the circumstances should have prompted further inquiry, the builder may be found to have acted in bad faith.

Example four: Landowner’s knowledge and inaction

A landowner learns that another person is constructing a permanent building on the land but deliberately remains silent for years, later demanding ownership of the improvement without reimbursement. The landowner’s knowledge and failure to object may support a finding of bad faith under Article 453.

How Courts Determine the Builder’s Status

Courts ordinarily examine the totality of the circumstances, including the following:

• the builder’s source of possession;
• the documents relied upon by the builder;
• the status of the certificate of title;
• the builder’s knowledge of competing claims;
• any permission or representation made by the landowner or another person;
• the date of construction in relation to demands, objections, or litigation; and
• the terms of any lease, construction agreement, or family arrangement.

Good faith is a factual issue. The party asserting it should present evidence showing not only that construction occurred, but also why the builder reasonably believed that construction was legally justified.

Important Distinction: Builder in Good Faith Versus Owner of the Building

Being a builder in good faith does not mean that the builder automatically becomes the owner of the land or retains permanent ownership of the building. Article 448 establishes a system of accession in which the landowner generally decides whether to appropriate the improvement or require acquisition of the land.

The builder’s principal protection is the right to proper reimbursement and, where applicable, retention of possession until payment. The builder’s claim must be resolved consistently with the landowner’s statutory option and any valid agreement between the parties.

Practical Steps for Builders

A person planning to build on land should obtain a current certified copy of the title, verify the registered owner, examine annotations and liens, and confirm the authority of the person granting permission to build.

The builder should also execute a written agreement stating who will own the improvement, who will bear construction expenses, what happens upon termination, and whether reimbursement will be available. Construction should be suspended when a genuine ownership dispute or formal objection arises until the parties’ rights are clarified.

All expenses and construction milestones should be documented. Independent valuation and technical records may be necessary if reimbursement becomes contested.

Practical Steps for Landowners

A landowner who learns that another person is building on the property should promptly determine whether the construction is authorized and should communicate any objection in writing. Delay may be used as evidence that the landowner knew of and acquiesced in the construction.

The landowner should avoid self-help demolition or forcible removal. Depending on the facts, the proper remedy may involve an action for recovery of possession, an action concerning accession, or another appropriate judicial proceeding.

Before demanding ownership of the improvement, the landowner should assess the reimbursement consequences under Articles 448, 546, and 548 and review any contract governing the construction.

Conclusion

A builder in good faith is generally one who constructs on another person’s land while believing that the builder owns the land, or has a valid claim of title, without knowledge of a defect in that claim. The status may entitle the builder to reimbursement and retention, but it does not automatically give the builder ownership of the land or the final choice over the property’s disposition.

The strongest claims are supported by a colorable title, reasonable verification of ownership, absence of notice of a defect, and complete construction records. Conversely, known ownership by another, mere tolerance, failure to investigate registered ownership, and construction after an objection may lead to a finding of bad faith.

Because the consequences depend heavily on the parties’ documents and conduct, both builders and landowners should obtain the title records, preserve evidence, and seek legal advice before construction proceeds or improvements are removed.

About Nicolas and De Vega Law Offices

 Nicolas and de Vega Law Offices is a full-service law firm in the Philippines.  You may visit the firm at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call +632 84706126, +632 84706130, +632 84016392 or e-mail [email protected].